Overeducation and Happiness in the Malaysian Graduate Labour Market

Lim, Hock-Eam, International Journal of Business and Society

ABSTRACT

The objective of this paper is to examine overeducation among Malaysian graduates with focus on its association with predetermined (before they enter the labour market) and current level of overall life happiness. Results reveal that there are a substantial percentage of overeducated graduates. Graduates who reported a higher level of predetermined happiness are less likely to be overeducated. Overeducation is also significantly and negatively associated with one's current level of happiness. This finding suggests 'hysterias' of overeducation and supports Job Competition Theory's prediction on persistent of overeducation. Thus, happiness might be one of the reasons why overeducation is a persistent and durable phenomenon.

During the last one-decade, we have witnessed a rapid development in Malaysian university education sector. According to the Ministry of Higher Education of Malaysia, total enrolment in Malaysian Higher Education Provider has increased substantially from 664,402 (year 2002) to 1,134,134 (year 2010). Indeed, for developing countries such as Malaysia, higher education is an important element to achieve sustainable economic growth.

The skilled labour that produced by higher education sector is believe to be capable of initiating research and development activities, which in turn will lead to more innovations in increasing productivity. Individually, higher education is a 'ticket' that promise an economic success and a 'ladder' for those less-privileged to move to middle class. Thus, investment in higher education, either by individual or government, is expected to yield high return.

Nevertheless, this return on higher education can be constrained by the incidence of overeducation - a situation where a graduate works in employment not commensurate with his/her qualifications (such as clerk and factory operator). Overeducation implies underutilisation of a nation's valuable human resources and one's university qualification (which also implies a low return on one's human capital investment). Overeducation also impedes government efforts on improving the socio-economic status of those less privileged through higher education. Empirically, overeducation has been found to be a persistent and durable phenomenon (Chevalier, 2000; Battu, Belfield and Sloane, 2000).

Since the financial crisis of 1997, the Malaysian economy has experiencing a persistent and increasing problem of graduate unemployment. Various studies have been conducted to studies the determinants of graduate unemployment. For instance, Lim & Normizan (2004) reported that around twenty per cent of the Malaysian graduates were in full-time employment that is not commensurate with qualification (overeducated). This amount is equal to those who obtained full-time employment that is commensurate with qualification. Similarly, Lim (2011) found that around twenty six per cent of the Malaysian graduates were overeducated and this amount is larger than those who are unemployed (around twenty three per cent). This highlights the problem of overeducated graduates can be prominent as unemployed graduates.

However, issue of graduate overeducation which is as important as graduate unemployment, has been largely ignored in the literature of Malaysian graduate unemployment. Similarly, despite enormous amount of research on relationship between unemployment and happiness, it appears that association between overeducation and happiness is yet to be measured. To fill the gap, this paper aims to study the determinants of graduate overeducation with focus on its association with overall life happiness.

As claimed by Gottschalk & Hansen (2003), relatively, the issue of overeducated workers has not gaining appropriate attentions in the economics literature. …

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